Precious Metals Spotlight: Gold as a Business Investment is Trending
November 14, 2024
At VBCE, we have both precious metals and currency exchange built into our name, as these are core pillars of our business and where our expertise runs deep. We’ve been around for over 35 years and have experienced all the ups and downs of the markets, which is a normal state of affairs. Sometimes, however, we notice something new that is exciting and leads us to learn more about what might be causing the change.
We’ve observed that, recently, more businesses have been buying physical gold as investments in their company portfolios. These tangible assets are investments. Now, buying gold as the price goes up is no surprise, but it’s who is buying the gold and the timing. We work with many individuals who have always been believers in investing in precious metals, and we work with businesses that use gold as goods in the manufacturing process for their products. These would be the typical gold or other metals buyers for milestone gifts for birthdays, weddings and graduations, with the occasional business buyers.
But why would more businesses want to invest in precious metals now, particularly gold? Like most market activities, we would see an increase in currency markets to counter the price of precious metals. Historically, investors move from one investment vehicle to another as the values change. Precious metals like gold are popular, or we’d see interest in the US Dollar. From a price perspective, we would expect to see the inverse trend of what the US dollar is doing - metals value decreasing when the US dollar is strengthening, but currently, both values are increasing. We see periodic dips daily, but overall we are experiencing steady increases in US dollar and gold prices this year.
We aren’t the only ones noticing this trend. Goldman Sachs recently shared that central banks worldwide are buying gold, driving demand and the prediction that gold prices will reach USD 3000/oz by 2025, making investors flock to the opportunity. JP Morgan indicates that preference for physical assets like gold can be tied to geopolitical events, US deficit concerns, central bank purchases, and inflationary hedging. Their price prediction was surpassed just a few months after publishing their reflection.
With this anomaly, businesses, small and large, are increasingly considering Gold as an investment. So, what do they need to know as they make this new investment?
Here are some tips to consider when buying physical gold:
Time horizon
Like any investment, you need to recognize if this is a short, or long-term investment. For Gold, you’d typically be looking at a longer-term timeline or a timeline that allows you to get a return on the initial purchase. There is a normal spread between buy and sell prices, so be aware of that difference as you educate yourself. In addition to seeing the price on the market increase, you need to know the cost from your initial purchase to track the overall return on the investment vs just tracking the market price. Holding gold for a longer period of time may benefit you as this would likely, based on historical rate increases, give you more of a gain vs using gold as a short-term investment.
Buying and Selling Gold
Initially, you are buying gold. But where will you sell it when ready?
Consumers should be aware that some companies that sell gold can sometimes have the inability to buy it back and vice versa. Many customers are surprised to learn this, and they have to go elsewhere to sell or buy their Gold. Ideally, you work with a reputable company that can withstand all market conditions and has the capacity to service all of your needs. Knowing the provenance of your gold is important to understanding the quality of the pieces.
Since gold is sold on a spot market, there can be a premium for certain forms in which gold comes in. For example, you may pay more for a 1oz gold coin from your current year than a previous one. For example, for upcoming 1oz. Royal Canadian Mint 2025 gold coins will be favoured, which would be slightly more expensive than a previous year. Ask your Trader which pieces have a premium so you know this when you plan your purchase.
Premiums can usually remain for a buy, and later, when selling, this is based on demand for that particular type of gold product. This can be due to the popularity of certain producers. For example, the Royal Canadian Mint is a desired producer, so its coins have a premium.
Bid and Ask vs Buy and Sell in Precious Metals
Since precious metals are priced in a live spot market, a company like VBCE needs to take a few steps to offer customers gold services, including access to the market for purchasing and selling gold. Common terms at this stage would include Bid and Ask:
- The BID is the price at which brokers like VBCE are ready to buy gold on the spot market for precious metals.
- The ASK is the price brokers like VBCE are ready to sell gold on the spot market for precious metals.
VBCE participates in the spot market to set pricing daily and support our customers' supply and demand. We provide the VBCE BUY rate for customers looking to sell their gold and the VBCE SELL rate for those looking to buy gold. These are our prices, which are based on the spot market, our cost on products, and our spread. A spread is the gap between two prices or rates. This is the normal way of doing business when trading precious metals and currencies reflecting a markup.
Reputable Dealers In Canada, gold and silver bullion are traded commodities sold through dealers. VBCE is one of ten registered Royal Canadian Mint Bullion DNA Dealers and Traders in BC. We are a qualified bullion trader recognized by LBMA accreditation. Our status allows us to buy and sell the highest quality, highly reputable products. We sell and buy gold that is 99.99% pure, which is the highest standard of purity. We use a machine which confirms the purity of gold and other precious metals we buy and sell. We have experienced Precious Metals Traders on staff and Customer Service Live Agents trained and knowledgeable about precious metals.
When selecting a dealer, make sure they sell AND buy precious metals. Establishing a relationship with a trusted Trader who can support your full investment will be helpful for you in the long run. You wouldn’t buy a stock from someone you couldn’t liquidate from later.
Buying Gold the First Time
You likely have many questions about buying gold the first time you decide to take this step. Here are some initial considerations:
- Consider your budget and how much you would like to invest. If the current price of a gold coin is $3718 Canadian dollars per 1 oz gold bar, divide your budget to determine the number of bars. For example, if I want to invest CAD$20,000 at the $3718 buy rate, then I would likely purchase five 1oz gold bars for CAD$18,590. There are fractional oz. coins if you are interested in different weights.
- Review the current buy prices and the different options between coins and bars. You may have a preference or want to speak to a Trader about the best deal right now in pricing. Do you want a coin with a premium? Or does it not matter?
- You will need to take the items with you; they are physical assets, so where might you store them securely? This can be done in a safe deposit box of safe, for example.
- Once ready to talk to a Trader, take your time and make sure you are comfortable with the steps and your knowledge of the process
Have more questions? Call us, and we’ll be happy to help answer the questions and provide real-time pricing for today’s live market rates. You can also view our buy and sell rates on our precious metals rate page.